Here's What We Like About ICICI Lombard General Insurance's (NSE:ICICIGI) Upcoming Dividend
Regular readers will know that we love our dividends at Simply Wall St, which is why it's exciting to see ICICI Lombard General Insurance Company Limited (NSE:ICICIGI) is about to trade ex-dividend in the next three days. Typically, the ex-dividend date is two business days before the record date, which is the date on which a company determines the shareholders eligible to receive a dividend. The ex-dividend date is important as the process of settlement involves at least two full business days. So if you miss that date, you would not show up on the company's books on the record date. Meaning, you will need to purchase ICICI Lombard General Insurance's shares before the 29th of May to receive the dividend, which will be paid on the 3rd of July.
The company's upcoming dividend is ₹7.00 a share, following on from the last 12 months, when the company distributed a total of ₹13.50 per share to shareholders. Based on the last year's worth of payments, ICICI Lombard General Insurance has a trailing yield of 0.7% on the current stock price of ₹1826.20. Dividends are a major contributor to investment returns for long term holders, but only if the dividend continues to be paid. We need to see whether the dividend is covered by earnings and if it's growing.
Dividends are typically paid out of company income, so if a company pays out more than it earned, its dividend is usually at a higher risk of being cut. ICICI Lombard General Insurance has a low and conservative payout ratio of just 24% of its income after tax.
When a company paid out less in dividends than it earned in profit, this generally suggests its dividend is affordable. The lower the % of its profit that it pays out, the greater the margin of safety for the dividend if the business enters a downturn.
See our latest analysis for ICICI Lombard General Insurance
Click here to see the company's payout ratio, plus analyst estimates of its future dividends.
Have Earnings And Dividends Been Growing?
Businesses with strong growth prospects usually make the best dividend payers, because it's easier to grow dividends when earnings per share are improving. If business enters a downturn and the dividend is cut, the company could see its value fall precipitously. For this reason, we're glad to see ICICI Lombard General Insurance's earnings per share have risen 11% per annum over the last five years.
The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. ICICI Lombard General Insurance has delivered 28% dividend growth per year on average over the past nine years. It's exciting to see that both earnings and dividends per share have grown rapidly over the past few years.
Final Takeaway
Is ICICI Lombard General Insurance an attractive dividend stock, or better left on the shelf? When companies are growing rapidly and retaining a majority of the profits within the business, it's usually a sign that reinvesting earnings creates more value than paying dividends to shareholders. This strategy can add significant value to shareholders over the long term - as long as it's done without issuing too many new shares. In summary, ICICI Lombard General Insurance appears to have some promise as a dividend stock, and we'd suggest taking a closer look at it.
In light of that, while ICICI Lombard General Insurance has an appealing dividend, it's worth knowing the risks involved with this stock. For example, we've found 1 warning sign for ICICI Lombard General Insurance that we recommend you consider before investing in the business.
A common investing mistake is buying the first interesting stock you see. Here you can find a full list of high-yield dividend stocks.
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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.